[Test Bank]Corporate Finance 12th Edition By Stephen Ross, Randolph Corporate Finance, 12e (Chapter 2) Financial Statements, Taxes, and Cash Flow Answer Key

Chapter 02 Financial Statements, Taxes, and Cash Flow Answer Key Multiple Choice Questions 1. Which one of the following is the financial statement that shows the accounting value of a firm's equity as of a particular date? A. income statement B. creditor's statement C. balance sheet D. statement of cash flows E. dividend statement Refer to section 2.1 AACSB: N/A Bloom's: Knowledge Difficulty: Basic Learning Objective: 2-1 Section: 2.1 Topic: Balance sheet 2. Net working capital is defined as: A. total liabilities minus shareholders' equity. B. current liabilities minus shareholders' equity. C. fixed assets minus long-term liabilities. D. total assets minus total liabilities. E. current assets minus current liabilities. Refer to section 2.1 AACSB: N/A Bloom's: Knowledge Difficulty: Basic Learning Objective: 2-1 Section: 2.1 Topic: Net working capital 2-1 Chapter 02 - Financial Statements, Taxes, and Cash Flow 3. The common set of standards and procedures by which audited financial statements are prepared is known as the: A. matching principle. B. cash flow identity. C. Generally Accepted Accounting Principles. D. Financial Accounting Reporting Principles. E. Standard Accounting Value Guidelines. Refer to section 2.1 AACSB: N/A Bloom's: Knowledge Difficulty: Basic Learning Objective: 2-1 Section: 2.1 Topic: GAAP 4. Which one of the following is the financial statement that summarizes a firm's revenue and expenses over a period of time? A. income statement B. balance sheet C. statement of cash flows D. tax reconciliation statement E. market value report Refer to section 2.2 AACSB: N/A Bloom's: Knowledge Difficulty: Basic Learning Objective: 2-2 Section: 2.2 Topic: Income statement 2-2 Chapter 02 - Financial Statements, Taxes, and Cash Flow 5. Noncash items refer to: A. accrued expenses. B. inventory items purchased using credit. C. the ownership of intangible assets such as patents. D. expenses which do not directly affect cash flows. E. sales which are made using store credit. Refer to section 2.2 AACSB: N/A Bloom's: Knowledge Difficulty: Basic Learning Objective: 2-2 Section: 2.2 Topic: Noncash items 6. The percentage of the next dollar you earn that must be paid in taxes is referred to as the _____ tax rate. A. mean B. residual C. total D. average E. marginal Refer to section 2.3 AACSB: N/A Bloom's: Knowledge Difficulty: Basic Learning Objective: 2-3 Section: 2.3 Topic: Marginal tax rate 2-3 Chapter 02 - Financial Statements, Taxes, and Cash Flow 7. The _____ tax rate is equal to total taxes divided by total taxable income. A. deductible B. residual C. total D. average E. marginal Refer to section 2.3 AACSB: N/A Bloom's: Knowledge Difficulty: Basic Learning Objective: 2-3 Section: 2.3 Topic: Average tax rate 8. The cash flow of a firm which is available for distribution to the firm's creditors and stockholders is called the: A. operating cash flow. B. net capital spending. C. net working capital. D. cash flow from assets. E. cash flow to stockholders. Refer to section 2.4 AACSB: N/A Bloom's: Knowledge Difficulty: Basic Learning Objective: 2-4 Section: 2.4 Topic: Cash flow from assets 2-4 Chapter 02 - Financial Statements, Taxes, and Cash Flow 9. Which term relates to the cash flow which results from a firm's ongoing, normal business activities? A. operating cash flow B. capital spending C. net working capital D. cash flow from assets E. cash flow to creditors Refer to section 2.4 AACSB: N/A Bloom's: Knowledge Difficulty: Basic Learning Objective: 2-4 Section: 2.4 Topic: Operating cash flow 10. Cash flow from assets is also known as the firm's: A. capital structure. B. equity structure. C. hidden cash flow. D. free cash flow. E. historical cash flow. Refer to section 2.4 AACSB: N/A Bloom's: Knowledge Difficulty: Basic Learning Objective: 2-4 Section: 2.4 Topic: Free cash flow 2-5 Chapter 02 - Financial Statements, Taxes, and Cash Flow 11. The cash flow related to interest payments less any net new borrowing is called the: A. operating cash flow. B. capital spending cash flow. C. net working capital. D. cash flow from assets. E. cash flow to creditors. Refer to section 2.4 AACSB: N/A Bloom's: Knowledge Difficulty: Basic Learning Objective: 2-4 Section: 2.4 Topic: Cash flow to creditors 12. Cash flow to stockholders is defined as: A. the total amount of interest and dividends paid during the past year. B. the change in total equity over the past year. C. cash flow from assets plus the cash flow to creditors. D. operating cash flow minus the cash flow to creditors. E. dividend payments less net new equity raised. Refer to section 2.4 AACSB: N/A Bloom's: Knowledge Difficulty: Basic Learning Objective: 2-4 Section: 2.4 Topic: Cash flow to stockholders 2-6 Chapter 02 - Financial Statements, Taxes, and Cash Flow 13. Which one of the following is classified as an intangible fixed asset? A. accounts receivable B. production equipment C. building D. trademark E. inventory Refer to section 2.1 AACSB: N/A Bloom's: Knowledge Difficulty: Basic Learning Objective: 2-1 Section: 2.1 Topic: Intangible fixed asset 14. Which of the following are current assets? I. patent II. Inventory III. accounts payable IV. cash A. I and III only B. II and IV only C. I, II, and IV only D. I, II and III only E. II, III, and IV only